Biodiesel Producers, Retailers Call for Extension, then Phase-Out of Blenders’ Tax Credit

A diverse group of biodiesel producers, fuel retailers, and trucking interests sent a letter to the Senate Finance Committee and the House Ways and Means Committee in support of extending and phasing out the biodiesel blenders’ tax credit, and outlining their opposition to efforts to shift the credit to a producers’ credit, as the tax-writing committees consider tax reform legislation.

NATSO Vice President of Government Affairs David Fialkov, issued the following statement:

“This is a significant development because we have every segment of the biodiesel supply chain writing in support of extending and phasing out the blenders’ tax credit. The blenders’ credit has successfully incentivized fuel retailers to incorporate biodiesel into their fuel supply in a manner that enables them to lower their diesel prices. This benefits trucking fleets and drivers who get to pay less money for fuel and it benefits biodiesel producers who have a vibrant, growing demand for their product. The blenders’ credit is good for everyone.

“The only real surprise here is that there are a small handful of domestic biodiesel production companies who didn’t sign this letter.  These companies, who represent approximately half of U.S. biodiesel production, continue to insist that the U.S. government pay them for simply making a product, regardless of whether the public wants to buy it. This may help them in the short-term but it doesn’t help their customers, and it certainly doesn’t help the truck drivers who they want to buy their product.

“Phasing out the blenders’ credit over five years makes sense in the context of comprehensive tax reform where Congress is looking to lower rates, simplify the tax code, and foster economic growth. Shifting to a producers’ credit, on the other hand, is excessively complicated, would create a brand new tax expenditure and would result in higher fuel prices.

“What’s more, it divides the stakeholder community. Fuel retailers do not support a producer credit. You don’t have to be Nostradamus to see that a divided stakeholder community makes it less likely that the biodiesel tax credit will be extended in any form. That would be undesirable for everyone. The companies that would be hurt the most, however, are not retailers, who will continue to sell fuel that their customers want to buy. It will be the small biodiesel producers who are unwittingly beholden to a flawed advocacy strategy.”

NATSO, based in Alexandria, Va., is a trade association that represents the U.S. travel plaza and truckstop industry. Other signers of the letter include: Advanced Biofuels Association, Washington, D.C.; American Trucking Associations, Arlington, Va.; AmeriGreen Energy, Lancaster, Pa.; Cargill Inc., Wayzata, Minn.; Petroleum Marketers Association of America, Arlington, Va.; and Sprague Energy, Portsmouth, N.H.

Here is the text of the letter, dated Oct. 31, 2017, and addressed to Sen. Orrin Hatch (R-UT), chairman of the Senate Finance Committee, and Sen. Ron Wyden (D-OR), ranking member of the committee:

Dear Chairman Hatch and Ranking Member Wyden:

For the last several years, [the undersigned trade organizations] have expressed concern about changing the biodiesel and renewable diesel blenders’ credit to a production tax credit.  The effort to change the credit in this manner was born out of a desire to cut off imports from Argentina and limit consumption of biodiesel in the United States to domestically produced product. Our associations and the companies we represent continue to believe that this policy shift would harm those who have already made investments to produce and blend biodiesel products, while raising prices to consumers in order to deal with a trade issue that has already been addressed.

Given the recent announcements by the Department of Commerce concerning trade issues surrounding biodiesel imports from Indonesia and Argentina, this policy shift is not only unwise but is now unnecessary. In a tax reform environment where Congress is attempting to broaden the base and lower rates, the undersigned organizations urge you to create a transitionary provision—similar to that adopted for wind and solar—and support a five-year phase out of the existing blenders’ credit.  In addition, we would support having the tax apply only for use in the United States to avoid any concerns of exports and trade violations.

For the first time, this letter also includes the support of major U.S. producers and distributors of biodiesel and renewable diesel who realize the necessity of renewing the existing credit rather than trying to create a new production credit. Indeed, beyond a small handful of companies, the rest of the biodiesel and renewable diesel supply chain–including consumers–support a phase-

out of the blenders’ credit to provide market certainty and compliment the Renewable Fuel Standard (which already provides a guaranteed demand for biodiesel).

The blenders’ credit has worked successfully to build a robust biodiesel and renewable diesel industry, one that has not only met the mandates under the Renewable Fuel Standard but exceeded them by over 100%.  As a result, in the last two years the United States has enjoyed over 2 billion gallons of diesel replacement fuels that reduce greenhouse gas emissions by greater than 50% relative to traditional diesel. On top of this, it has afforded customers such as the trucking industry and Northeast heating oil users a reduction in the overall price point of their fuels. Shifting to a producer credit on the other hand would limit supply and raise the price of both diesel fuel and heating oil. It would also subject the United States to potential trade policy disputes.

We urge you to reject efforts to change the credit at this time.  The blenders’ credit has worked for the greatest number and has created the greatest good for those who produce and consume biodiesel and renewable diesel fuels.